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Question
A company is evaluating 3 possible investments. Each uses straight-line depreciation. See data below:
| Project A | Project B | Project C | |
| Investment | $400,000 | $20,000 | $100,000 |
| Salvage value | $0 | $2,000 | $5,000 |
| Net cash flows: | |||
| Year 1 | $100,000 | $10,000 | $40,000 |
| Year 2 | $100,000 | $8,000 | $25,000 |
| Year 3 | $100,000 | $5,000 | $30,000 |
| Year 4 | $100,000 | $3,000 | $10,000 |
| Year 5 | $100,000 | $0 | $0 |
What is the rate of return for Project C?
A) 5%
B) 4%
C) 18%
D) 10%
Answer
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